Rover Films International V. Canon Films Notes

Rover Films International v. Canon Films

Facts (proper’s claim)

Proper Film Ltd. is a company incorporated in Guernsey which had also concluded a contract with Thorn EMI for the exhibition of films in Italy, though in this case on television. On 9 April 1985 Thorn EMI had granted a licence to Proper to exhibit nine films on Italian television, with up to seven transmissions in each case, for a total licence fee of U.S. $1,800,000. Thorn EMI warranted that at the time of the delivery of each film they would have a good right to grant the licence for its transmission. Delivery was defined under the heading of “Availability” as follows: “Not earlier than two years from date of first theatrical release on the territory.” The purpose of this postponement was of course to enable the films to be shown in cinemas for an initial period of two years without competition from screenings on television. We were told that in relation to the films in question the commencement of their availability for showing under the agreement would be about now, in 1988. The total licence fee was apportioned according to the estimated value of each film comprised in the agreement, similarly to what was subsequently done in the Rover contract, and the most important film was “Passage to India” to which $500,000 was allocated.

One then comes to the provisions dealing with the payment of the total licence fee of $1,800,000. This was to be paid in three instalments, 20 per cent. on 15 May 1985, 30 per cent. on 30 September 1985, and the balance of 50 per cent., i.e., $900,000, on 30 September 1986.

The first two instalments totalling $900,000 were duly paid in 1985. Then, as will be remembered, Cannon took over Thorn EMI by about 1 May 1986, and relations between the parties deteriorated, but on this occasion not due to the fault of Cannon. The Italian television rights in “Passage to India” had previously been granted to another exhibitor, with the result that Cannon had to procure the assignment or reassignment of the rights in this film. But Proper considered that Cannon had willfully disabled themselves from obtaining the rights to “Passage to India” and had evinced an intention not to be bound by the agreement.

However, while the proceedings were pending, the second instalment of $900,000 became payable by Proper on 30 September 1986. In a letter of 25 September which also dealt with one of the instalments payable by Rover, the plaintiffs' solicitors announced that in the circumstances Proper would pay the $900,000 into a joint account of the solicitors pending the outcome of the action. This was not acceptable to Cannon. On 3 October they treated the contract as terminated, relying both on Proper's breach in failing to make the payment and on the provision that in that event “this agreement shall become null and void.”

Issue

The issue is whether Cannon are entitled to claim this instalment notwithstanding the fact that they rescinded the contract, on the ground of Proper's breach, as it is now accepted they were entitled. Proper contend that if they had paid this instalment before rescission, then it would now be recoverable by them, and that a fortiori they cannot now be held liable to pay it.

Holding

Kerr LJ

The fact that the breach was by the claimant is irrelevant

Subject to Mr. Pardoe's reliance on the Hyundai decision, to which I turn in a moment, it is clear from the passages which I have emphasised that if Proper had paid the disputed instalment of $900,000, and if the contract had thereafter been rescinded by Cannon for whatever reason, Proper would have been entitled to recover this sum; and if the reason for the rescission of the contract had been a breach on the part of Proper, then Cannon would still not have been entitled to retain this sum but would have been limited to a claim in damages. The fact that the present contract is not one of sale cannot affect the position in principle.

In the present case Proper do not claim repayment, but Cannon claim that the liability to pay survives the rescission of the contract. Clearly that cannot make any difference to the outcome; on the contrary, it must be a fortiori from the point of view of Proper, who are merely resisting Cannon's claim.

Was there a total failure of consideration? Distinguishing Dies and Hyundai

That decision was distinguished by a majority of the House of Lords in Hyundai Heavy Industries Co. Ltd. v. Papadopoulos [1980] 1 W.L.R. 1129. The case arose from a shipbuilding contract which provided that the builders should “build, launch, equip and complete” the vessel and that its construction should proceed continuously from keel laying to delivery. They held that it did, in effect because this was not a contract which merely provided for the sale and delivery of the ship, but because it was in the nature of a building contract under which the yard was obliged to continue with the construction of the vessel throughout. By continuing to work upon the ship during the period since the payment of the previous instalment, the builders had accordingly provided consideration for the instalment in question, with the result that it remained due despite the builders' cancellation of the contract.

The issue in the present case, as I see it, is accordingly whether it falls on the side of cases such asDies v. British and International Mining and Finance Corporation Ltd. [1939] 1 K.B. 724, or whether the terms of the contract and the facts lead to the conclusion that it is to be assimilated to the situation inHyundai Heavy Industries Co. Ltd. v. Papadopoulos [1980] 1 W.L.R. 1129. Had Thorn EMI/Cannon provided any consideration under the contract for which the instalment of $900,000 was payable, or was this instalment payable merely as an advance for the obligations which Thorn EMI/Cannon had agreed to perform thereafter? When referring to the provision of consideration in this context, in...

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